Please correct answer and don't use hand rating Suppose the current price of a share of Apple Computer is $226.50. A call option is available with strike price $230, andthe price of this call option is $4.80. A put option is availablewith strike price $220 and the price of this put is $3.30. Theexpiration dates of these options are T = 1 month from now.We write S1 for the market price that a share of Apple Stockwill have on the expiration date.write a formula for the payofffunction of the call option as a function of S1, write the profitfunction of the put option as a function of S1Supposing atrader obtains a strangle position using the call and putoptions on Apple above, write the profit function of thestrangle position, and then draw a sketch of the profit graphas a function of S1

Explanation The payoff function of the call option is equal to the maximum of zero and the (S1 -…

Answered: Suppose the current price of a share of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 1P

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The price of Newgen Corp. stock will be either $94 or $103 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 7.90%. (Do not leave any empty spaces; input a O wherever it is required. Omit "$" sign in your response.) a. Suppose the current price of Newgen stock is $104. What is the value of the call option if the exercise price is $94 per share? (Round the final answer to 2 decimal places.) Call option value b. Suppose the exercise price is $109 in part (a). What is the value of the call option now? Call option value
Use the data in the figure 20.1 and calculate thepayoff and the profits for investments in each ofthe following January expiration options, assumingthat the stock price on the expiration date is $125.a. Call option, X=$120b. Put option, X=$120c. Call option, X=$125d. Put option, X=$125e. Call option, X=$130f. Put option, X=$130
You have the following information about LearnMore Inc.’s stock and a two-month call option with a strike price of $140.00. LearnMore Inc.’s current stock price is $100.00. You are using the multiperiod binomial option pricing model to find the value of the two-month option with two periods. ∏u∏u and ∏d∏d values given here apply to any period. Data Collected for LearnMore Inc. u 1.5032 d 0.5922 ∏u∏u 0.2357 ∏d∏d 0.3555 You work with a junior analyst to calculate the value of the option, and she submits her inferences to you. Which of the following points are true in the case of LearnMore Inc.’s stock options? Check all that apply. The option payoff if the stock goes up in two months will be $10.32. The value of the two-month call option with a strike price of $140.00 at the end of two months will be $2.43. The value of the call option will always remain $2.43, irrespective of the time until expiration. LearnMore Inc.’s stock price…
One month ago you purchased a put option on the S&P500 Index with an exercise price of $900.00. Today is the expiration date, and the index is at $896.46. a. Will you exercise the option? b. What will be your profit?
Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. The holder of the option will gain if the price of the stock is above 52.50 in March. True or False?
You buy a put option on IBM common stock. The option has an exercise price of $136 and IBM’s stock currently trades at $140. The option premium is $5 per contract.a. What is your net profit on the option if IBM’s stock price increases to $150 at expiration of the option and you exercise the option? b. How much of the option premium is due to intrinsic value versus time value?c. What is your net profit if IBM’s stock price decreases to $130?d. Draw the payout diagram at maturity on a short put option position, option premium = $2, and the same exercise price... (Please give the full solution I will upvote)
Consider the following options portfolio. You write an August expiration call option on IBM with exercise price $150. You write an August IBM put option with exercise price $145.a. Graph the payoff of this portfolio at option expiration as a function of IBM’s stock price at that time.b. What will be the profit/loss on this position if IBM is selling at $153 on the option expiration date? What if IBM is selling at $160? c. At what two stock prices will you just break even on your investment?d. What kind of “bet” is this investor making; that is, what must this investor believe about IBM’s stock price to justify this position?
Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 100 shares with the excise price of $140. Required: a-1. If the stock price at option expiration is $144, will you exercise your call?a-2. What is the net profit/loss on your position? (Input the amount as a positive value.)a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b-1. Would you exercise the call if you had bought the November call with the exercise price $135?b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?c-2. What is the rate of return on your position? (Negative…
Please correct answer and don't use hand raiting
Assuming there's a July call option on ABC.Inc with a strike price of $35 is also priced at a $0.75 premium. Right now the stock is priced at $30 per share and you write the call option for $0.75. Then the stock price goes to $33, so what is your total ($) gain or loss per share?
Suppose that currently, stock BVC is trading at $100 per share. A put option with a strike price of $120 that expires in one year is selling at $11.12. What is the profit to a trader who buys this put option, assuming that in one year the stock price of BVC is $125
Required: Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following December 2019 expiration options on a single share, assuming that the stock price on the expiration date is $137. (Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.) a. Call option, X = 135 b. Put option, X = 135 es c. Call option, X = 145 d. Put option, X = 145 Payoff Profit/Loss

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